Dovish MPC opts for status quo
While the Reserve Bank of India kept policy rates and its accommodative stance unchanged, additional monetary measures have been brought in to fight the second wave of Covid-19.
While the Reserve Bank of India kept policy rates and its accommodative stance unchanged, additional monetary measures have been brought in to fight the second wave of Covid-19.
According to a BofA Securities report, the Covid-19 shock could delay India touching the GDP of Japan by three years. In their latest estimates, it will now happen by 2031 if the economy grows at 9%.
Market experts welcome the 30–stock benchmark adding 6,000 points since December 1, but also caution against stretched valuations.
The big question is how much more foreign exchange will the Reserve Bank of India buy, and why?
While gloom prevails across economies, a State Bank of India report says that the Reserve Bank of India has been relatively successful in ensuring financial stability in the market since May.
While the rating agency downgraded India’s sovereign rating, BofA Securities’ economists see the present downturn as cyclical rather than structural; say fiscal stimulus is critical for recovery.
The amount is just 0.8% and 5.8% of India’s GDP and foreign exchange reserves, respectively. And the maturity profile is reasonably spread out in FY21.
Since April 2001 foreign exchange reserves grew 11.15 times to $476.09 billion in mid-February; the RBI may add $21 billion more by March 2021, according to a BofA Securities report.